Why I'm happy to be in this biz

A friend of mine is trying to start a business. Not an expensive business--something that would be part time and low overhead.

Nonetheless, the cost of starting this business is going to be, oh, three or four times what I've spent publishing over the past two years, including the times where I've basically taken a small stack of money and set it on fire. So this person is trying to raise capital, which means asking people for money.

Guess how that's going?

I was thinking about that when I read Joe Konrath's latest post about his efforts with Amazon's exclusivity program (short answer: How well it works totally varies from book to book, and no one knows why).

But Konrath is cool with that (yay, experimentation!) and toward the end of the post, he gets into goals versus dreams, writing:

I got into this business in 2002. Now, for the first time, I'm master of my own destiny, captain of my own ship. The freedom to make my own decisions is, in many ways, more important to me than money. 

As always, when you run your business, you need to set your own attainable goals. "Attainable" means they are within your power. Anything that requires the "yes" or "no" from someone else isn't a goal, it's a dream.

That's exactly the problem my friend is facing: They are making starting their business contingent on getting X amount of money from someone else. Which I think is an approach that may well have to be re-evaluated, but the fact remains that X is a pretty sizeable amount of money for this person, and it's going to take a lot of effort to get it together. So imagine if X was, say, the amount of money it takes to build a prototype CT scanner or a state-of-the-art computerized warehouse: Funding this enterprise on their own would simply be impossible, and all their goals would effectively be dreams. Which would suck.

Isn't it nice that you need so much less money to get into self-publishing? And you don't even need to have all that money at once--you can start small and do more as you can afford it. I published Trang in 2011 and only started experimenting with on-line advertising this year. That lag hasn't hurt anything. Konrath ran his latest batch of marketing experiments using titles that are much older than mine--nobody cares.

And--this is important--it doesn't cost you anything to have a book sitting there, even if it's not selling. That's very different from other kinds of businesses, where unsold inventory ages out and loses value.

Extremely low capital requirements, and unsold inventory that doesn't rack up costs. Self-publishing is a very nice and very unusual business.

How unusual? Konrath's post was picked up by The Passive Voice, and in the comments Randall Wood remarked:

I was discussing Joe’s numbers with a friend the other day. I mentioned that he had hit the 1 million books sold mark, which I thought of as an accomplishment, but I then added the fact that he gave away 600,000 books to get there.

My friend snorted his beer and about choked.

My friend is a successful businessman. He commented that Joes rate-of-return was horrible. Joe thinks otherwise. I would say they are both right depending on their individual points of view.

I would say that the businessman friend is in a normal business. You know, the kind of business where if you give away a free samples, it actually costs you something. If Konrath had given away 600,000 paper books, which he'd paid for at the wholesale rate and then paid to ship, in order to sell 1 million full-price books, then the businessman friend would have a valid point. But giving away digital copies? Costs him nothing, and costs Amazon a fraction of a cent. Konrath's rate of return is just fine, because his expenses are very close to zero.

Extremely low capital requirements, inventory that doesn't rack up costs as it sits there, and samples that are free to the vendor as well as to the customer. This is a GOOD business.